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Firm-Embedded Productivity and Cross-Country Income Differences

Author

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  • Alviarez, Vanessa
  • Cravino, Javier
  • Ramondo, Natalia
Abstract
We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to the components of productivity that differ across firms and that can be transferred internationally, such as blueprints, management practices, and intangible capital. Our approach relies on micro-level data on the cross-border operations of multinational enterprises (MNEs). We compare the market shares of the exact same MNE in different countries and document that they are about four times larger in developing than in high-income coun-tries. This finding indicates that MNEs face less competition in less-developed coun-tries, suggesting that firm-embedded productivity in those countries is scarce. We propose and implement a new measure of firm-embedded productivity based on this observation. We find a strong positive correlation between our measure and output per worker across countries. In our sample, differences in firm-embedded productivity account for roughly a third of the cross-country variance in output per worker.

Suggested Citation

  • Alviarez, Vanessa & Cravino, Javier & Ramondo, Natalia, 2021. "Firm-Embedded Productivity and Cross-Country Income Differences," IDB Publications (Working Papers) 11020, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:11020
    DOI: http://dx.doi.org/10.18235/0003029
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    1. Olegs Krasnopjorovs & Konstantins Kovalovs, 2021. "Productivity Analysis of Latvian Companies Using Orbis Database," Post-Print hal-03548342, HAL.

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    More about this item

    Keywords

    Development Accounting; TFP; Multinational Enterprises;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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